The General Operating (G.O.) budget accounts for almost 60% of total expenditure at the average Top 25 university. In 2019 this budget ranged from $374 million at the smallest Top 25 school to over $2.2 billion at the largest. Almost three-quarters is spent on staff.

Expenditures are less prone to inter-provincial and inter-university differences and complexities than Incomes. However, universities do differ for a variety of reasons – size, location, academic program, age, physical condition, and other factors. Those differences may be reflected in resource allocations.

The G.O. budget is allocated across seven functions – Non-Credit Instruction (mainly extension programs), the Library, Computing & Communications, Central Administration, Student Services, Physical Plant, and Instruction & Non-Sponsored Research – where the teaching happens. (There are actually eight units, but Administration & Academic Support and External Relations have been re-combined in this analysis as Central Administration, reflecting the structure in earlier years.) A description of each function can be found in the CAUBO reporting guidelines HERE (page 20).

Please Note: Internal Sales and Cost Recoveries have been removed from G.O. expenditure for the purposes of this analysis because they are used to differing degrees among some universities, and not at all at others. This undermines comparability. See explanation HERE.

Of course, the years since 2001 have been impacted by societal, technological and economic change that imposed new cost pressures. But some of the change had the reverse affect. Even in 2001, many tasks were performed by expensive armies of administrative staff, but have since been automated. For all the fiscal challenges of change, there were significant savings as well.

For the purposes of this Indicator, the G.O. functions are analyzed in three categories:

  • Academic-Focused (Instruction & Non-Sponsored Research, Non-Credit Instruction, Library)
  • Operational Support (Computing & Communications, Central Administration, Physical Plant)
  • Student Support (Student Services)

 

2 A) RESOURCE ALLOCATION – EFFICIENCY RANKINGS

2A

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The Summary Rankings are derived from the detailed rankings in the first four of the tables below. Additional analyses are included but do not form part of the Summary Ranking.

2 B) RESOURCE ALLOCATION – EXPENDITURE RANKINGS AND FINANCIAL IMPACT

These tables show the 2001 and latest-year spending levels, the latest expenditure, and the dollar impact of spending level variances (the amount by which the university is over-spending or under-spending, compared with past levels or current peer group levels).

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The additional tables include summaries for each of the seven G.O. functions, and illustrate the importance of efficient resource allocation.

There are plausible explanations for some movement in allocations to the functions. The advent of new technologies has triggered a reduction in the cost of university libraries, but had the reverse affect in the computing area. The issue of deferred maintenance covering physical infrastructure is well-publicized, and the accelerating cost of maintaining aging plant might be expected to show in the Physical Plant area. The range of Student Services has expanded, and increased enrollment has placed higher demands on them, although most of this cost has been covered by fast-rising compulsory non-academic fees levied on all students.

However, while all the functions are impacted by inflation, and by societal and technological change, some are more impacted by enrollment than others. Funding needs in Instruction and Student Services are more enrollment-sensitive than those in the other functions.

Even allowing for the fact that various complexities can impact each university differently, the additional tables reveal some surprisingly wide variances:

  • Library expenditures range from 2.5% of General Operating expenditure  to 6.9%. (Table 2.7)
  • Computing & Communications costs range from 1.8% to 7.2%. (Table 2.8)
  • Central Administration cost ranges from 9.2% to 16.5%. (Table 2.9)
  • Student Services expenditure ranges from 3.6% to 15.2%. (Table 2.10)
  • Physical Plant expense ranges from 7.0% to 16.0%. (Table 2.11)

In this “zero sum game”, resource allocations to the other functions ultimately impact on the Instruction area:

  • The highest Top 25 university delivers 67.0% of its General Operating budget to Instruction, the lowest just 50.9%. (Table 2.5)

There is clear correlation between performance in this Resource Allocation Indicator and performance in most of the other Indicator areas.

The deterioration in spending efficiency is the result of some fundamental weaknesses:

  • A lack of appreciation for the “cause and affect” syndrome. It is no coincidence that the schools doing a better job of controlling support costs are the schools doing a better job of delivering funding to the classroom.
  • A failure to appreciate that small, annual increments can turn into a damaging shift over a longer timeline – “issue creep”.
  • A lack of appreciation for the difference between largely-fixed cost areas such as Central Administration (which have little reason to track enrollment, up or down) and variable cost areas such as Instruction and Student Services (which are more directly impacted by changing enrollment levels).

The issue creep is particularly dangerous. Since 2001 there has been a widespread pattern of relatively small increases in the percentage allocation levels to Operational Support activities. Cumulatively, they have built into a significant cost increase amounting to millions of dollars. In the world of PSE, those dollars can only come from increased government funding, increased student fees, or classroom cuts. This problem compounds when universities compare themselves to peers that are exhibiting the same patterns; they fall victim to “social proof” – the notion that if everyone else is doing it, then it must be okay.

The most notable issue creep has seen Instruction gradually decline from 58.6% of G.O. expenditure to 57.3% since 2001, depriving the classroom of substantial volumes of funding; more than half of the schools have reduced this allocation level (Table 2.5). Meanwhile Central Administration has increased from 11.0% to 12.5%; more than three-quarters of the schools have increased this allocation level (Table 2.9).

Of course, these are averages, and some universities have seen far higher shifts, with heavy dollar impacts.

Every university has inefficiency-skeletons in its closet, some more than others. They are not the same at every school but they have the same affect. They deflect funding away from core purpose, and increase the pressure for student fee hikes and classroom cutbacks.

Within those closets rests the clear opportunity for a more surgical – and less harmful – approach than the one universities traditional adopt. The prudent and responsible approach is to rectify expenditure inefficiencies before targeting increased income from provinces and students, and imposing widespread campus cuts, including cuts to the classroom.

The consequences of COVID-19 will exacerbate these longstanding issues, and magnify the importance of taking that more surgical approach.